Uber case is really about purpose of regulation

Do we regulate taxi rates in order to make the experience a better one for the public? Or do we do it to keep taxi drivers from having to face competition and pressure to improve their service?

The controversyaroundUber, a service which lets people reserve for-hire sedans via a smartphone app, has brought this question to the forefront, even though the issue itself goes far beyond Uber alone.

On its face, the Uber debate revolves around a set of questions that seem simple enough: Is Uber breaking laws, or not? Are the individual drivers? But the underlying question is different and far more complex: Should the law permit what Uber is doing, or shouldn’t it?

Linton, though, said he’s responding to complaints he’s heard from cabbies who say Uber’s eating into their business and from customers who feel they’ve been overcharged. The sting was necessary reconnaissance, he said.

But this is exactly crux of the issue. Why are taxis a regulated utility while bakeries aren’t? Why is electricity a regulated utility but backyard propane tank sales are not? Why are tap water fees regulated but not the bottled water prices we pay in the supermarket?

To say that taxis are different from cupcakes because taxis are regulated and cupcakes are not begs the question (in the grammatically correct sense).

It’s not uncommon for one business to complain that another is “eating into their business.” Whole Foods is eating into Giant’s business. But Giant doesn’t go to the DC Supermarket Regulatory Commission and ask them to take action to stop Whole Foods. Amazon has taken a lot of business away from brick and mortar retailers, which is too bad for our neighborhood corridors, but we don’t respond by banning Amazon (though it would be fair to insist that both pay the same amount of sales tax).

But, many are saying, the difference is that Uber, or more specifically its drivers, may be breaking existing rules, while Whole Foods and Amazon are not. In some regards, this may present an important distinction, but from a public policy standpoint, it is somewhat irrelevant.

We can ask 2 questions: What are the rules now, and what should they be? Regulations can be beneficial or they can be harmful. There are many rules we don’t have which ought to exist, and many that do exist which should be repealed.

If Uber is doing something which is not permitted to regular taxis, we can either stop Uber from doing that thing, or we can allow regular taxis to partake in the same behavior. As I said in my Post editorial, I’ve never used Uber, don’t plan to, and don’t care that much about Uber specifically as a company. But if they are competing unfairly against taxis, then let’s let taxis compete against Uber rather than shutting down the competition.

When deciding which approach take, the Taxicab Commission should bear in mind one and only one principle: What’s good for customers? The degree to which Uber is “eating into the business” of existing taxis is immaterial, and Linton should not be making decisions on that basis.

A common criticism of many regulatory agencies is “regulatory capture,” shorthand for the way that an agency becomes more sympathetic to the needs of the industry it regulates than the interests of consumers. This happens because regulators tend to get to know their counterparts at regulated companies well, to see issues from the companies’ point of view, and also look to those companies for future jobs.

The starkest example of regulatory capture is the Minerals Mining Service, which was supposed to be regulating deep-water oil drilling but instead ended up just speeding approvals and overlooking dangerous practices, ultimately with disastrous consequences.

Taxi drivers’ main gripe against Leon Swain’s leadership at the Taxicab Commission was that he didn’t do enough to protect drivers’ interests. They are suing Mayor Gray and Ron Linton as well, for not giving them more of a voice on the board. In short, drivers want DCTC to be more captured by its industry. However, that would absolutely not benefit customers.

That said, Linton’s proposal for taxi rates does seem customer-centric. He wants to raise rates, but eliminate many of the confusing surcharges that annoy riders and make it easier for drivers to cheat customers. When the government has to set taxi rates, as it does for street hails, those rates should be high enough to ensure that driving a taxi brings in a decent living, not because it’s a jobs program, but because having a lot of taxis is good for people who want a taxi. In turn, this also benefits drivers, a prime example of how public interest and the interest of drivers needn’t always be in opposition to one another.

The debate over whether Uber is breaking a law right now is an interesting one, and it’s fine for DCist and others to discuss it. But let’s not lose sight of the longer-term question, as well. What are the right taxi regulations? How much do we need to regulate to advance the public interest, and which regulations are just protecting a small group of people from needed competition?

David Alpert is the founder of Greater Greater Washington and its board president. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He now lives with his wife and daughter in Dupont Circle.